Patent reform proposal withers in Senate

A bill that was supposed to address the problems associated with “patent trolls” has been scrapped by the U.S. Senate.

Senators have found there is wide disagreement on how to define patent trolls, with concerns for universities, garage inventors and businesses that may want to hold onto technology for a while.

In general, patent trolls are best known for filing frivolous patent infringement lawsuits.

“Unfortunately, there has been no agreement on how to combat the scourge of patent trolls on our economy without burdening the companies and universities who rely on the patent system every day to protect their inventions,” Sen. Patrick Leahy (D-Vt.), said in a recent statement. “We have heard repeated concerns that the House-passed bill went beyond the scope of addressing patent trolls, and would have severe unintended consequences on legitimate patent holders who employ thousands of Americans.”

Leahy, chairman of the Senate Judiciary Committee, says “broad bipartisan support” is needed on the issue to get a bill approved in the Senate.

“Regrettably, competing companies on both sides of this issue refused to come to agreement on how to achieve that goal,” he added. “Because there is not sufficient support behind any comprehensive deal, I am taking the patent bill off the Senate Judiciary Committee agenda. If the stakeholders are able to reach a more targeted agreement that focuses on the problem of patent trolls, there will be a path for passage this year and I will bring it immediately to the Committee.”

Over recent weeks, Leahy said compromise was possible on the Patent Transparency and Improvements Act. But The Hill reported that Senate Majority Leader Harry Reid (D-Nev.) will not bring the bill to the entire Senate for a vote because of opposition from the pharmaceutical sector and from trial lawyers.

The House passed a patent reform bill, called the Innovation Act, last year. “It is extremely disappointing to hear that the Senate has once again delayed action on legislation to combat the ever increasing problem of abusive patent litigation," Rep. Robert Goodlatte (R, Va.) said in a statement.

In addition, Sen. Chuck Grassley (R-Iowa) said he was "surprised and disappointed that the Senate Democratic leadership is not willing to move forward on a bill that we've worked on so hard."

"We put in a good faith effort to get to this point, and it's too bad that the bill is being pulled from the agenda," Grassley added in the statement.

Meanwhile, the Main Street Patent Coalition – which represents retail businesses, restaurants and others, such as the Application Developers Alliance – was disappointed that more progress is not being made on patent reform.

“We are disappointed that the Senate Judiciary Committee couldn’t get the job done,” Michael Meehan, MSPC manager, said in a statement. “Without reasonable and essential reform, millions of businesses will continue to be at risk until Congress puts trolls out of business. The choice of special interests over small businesses was the wrong decision, but we aren’t giving up the fight.”

He said that polls indicate 73 percent of small business owners believe patent trolls should be deterred by penalties for filing fraudulent patent assertions or for sending abusive demand letters, and 76 percent believe courts should impose financial sanctions against patent trolls which file baseless lawsuits.

“Main street business needs patent reform and we will continue to work toward that goal,” Meehan said.

In addition, the Internet Association’s CEO, Michael Beckerman, said in a statement that, “The delay on a patent reform vote in the Senate Judiciary Committee is deeply disappointing. Patent abuse harms thousands of businesses – both small and large – from retailers to credit unions to main street businesses and the Internet community, as well as millions of consumers. Every day that reform is delayed is a win for patent trolls and a loss for hardworking Americans.”

On the other hand, among those opposing the bill were the American Council on Education and Association of American Universities.

In a May 20 letter to the Judiciary Committee, the groups said, “We believe the measures in the legislation … go far beyond what is necessary or desirable to combat abusive patent litigation, and would do serious damage to the patent system. Many of the provisions would have the effect of treating every patent holder as a patent troll; other provisions seriously weaken legitimate patent enforcement while lacking any discernable impact on curbing the abusive practices of patent trolls. The effect of the proposed legislation is to weaken the ability of every patent holder to enforce a patent and promote a business model that does not rely on patents, thereby discouraging investment in innovation.”

In addition, earlier this year InsideCounselreported that there was speculation that earlier Senate delay in the markup of the patent reform bill related to the formation of a new industry organization called the “Partnership for American Innovation (PAI).” The organization was formed by such business giants as: Apple, DuPont, Ford, GE, IBM, Microsoft and Pfizer. Former U.S. Patent and Trademark Office (USPTO) Director David Kappos, who now works at Cravath, Swaine & Moore, was named as “a senior advisor” to PAI. In a statement, Kappos warned, "Now is not the time to gamble with America's innovation engine — once patent protections are eliminated, they cannot be restored."